Good Day: 243 W 120 Sells, Our Windows Clear Customs

It was a VERY good day yesterday. Our windows had come arrived in port Thursday morning, and managed to clear customs in a single day. Given all the other delays on our project I was half expecting to hear that there would be a 3 or 4 week hold for customs inspection. They’ll probably be delivered on Tuesday morning. Getting the building closed up will be a major step for us…

243 West 120th Street, HarlemBut the really big news is that 243 West 120th Street closed yesterday – just in the nick of time – it was the last day before the loan limits dropped over $100K – so things went right down to the wire.

I feel a bit of accomplishment with this sale… I had done a blog post ages ago (April ’10) about how I thought the place was an excellent opportunity. Location is just incredible – it’s just steps from everything that’s new and exciting on 8th Ave / FDB, and it has a really high FAR for anyone who wants to add space. It took about a year for the blog post to get noticed, but early this year I started hearing from blog readers that they saw the post and were interested in the house. One contacted, me, then another, then another…

In the end it was a bit of a battle between two of those three blog readers to get the house. One of them was working with the real estate agent we used when we sold/bought, the other went directly to the owner through a social contact. The one working with our agent contacted me on June 20th saying “…so it looks like we got the house…”, then on July 10th the reader who had gone directly to the owner contacted me and said “we signed a contract on the house on 120th last week”. I was a little flabbergasted that two people thought they had it and I knew both of them. Turns out the listing agreement had just expired so the seller was able to sell the place without paying a commission.

For those of you who are curious – the sales price was $620K plus a few thousand in other concessions to the seller. That works out to about $182/sq. ft. The place is possibly in worse condition than ours was when we bought it since demolition has not been done yet. But it did have a certificate of no harassment and it had approved plans with active permits to convert to single family – so it was pretty much ready to go.

You can see from the pictures I took nearly 2 years ago that needs tons of work…

243 West 120th Street hallway and stairs243 West 120th Street original details243 West 120th Street hallway243 West 120th Street top floor

Given the location and the fact that shells south of 125 are getting very hard to get, I think the new owners got it for a good price. They could do a $1M renovation and not over-invest.

It was a nail-biting closing. It turns out there was a lien on the property that was rather sizable and when push came to shove there wasn’t enough money to pay off the seller’s mortgage. No one was expecting it to be a short sale and people had to scramble to get the seller’s bank to approve the sale in time for the buyers to get their loan before the loan limits went down. It almost didn’t happen, but after a 5 hour closing on the last possible day, it did finally go through.

And after all that the new owners went to the house last night to check things over and left covered in fleas! So job #1 is to get rid of the fleas…

What Things Are Selling For In “High Five”

It’s getting really hard to find $500,000 shells around Mount Morris Park. I have a couple of clients who would love one (even a more expensive one) but the shells are getting bought up quickly and the few remaining aren’t for sale (or have huge complicating factors).

So the question then becomes where else can one get an inexpensive shell that’s a good investment? There’s a quaint little neighborhood just north of 125 on either side of 5th Avenue. A few of the townhouses in the area are just stunning – far more interesting than what you see in other parts of Harlem…

Upper 5th Avenue ArchitectureHigh Five ArchitectureBecause it straddles the line between Central Harlem and East Harlem it’s a bit hard to describe the neighborhood – is it East Harlem or Central Harlem? Apparently some people call the area “High Five”. Think what you want of the label, but it’s clearly a distinct little neighborhood that needs a proper name.

To me the boundaries of the neighborhood are Lenox Avenue to the west (but not including Lenox), probably Madison to the East (both sides), 126th to the south, and 130th to the North.

Map showing the High Five neighborhood in HarlemThe north and east boundaries are a little fuzzy though… To the east there are a few blocks between Madison and Park that might fall into High Five (since they’re generally consistent with the High Five aesthetic, and don’t fall into any other neighborhood). Facade of the Langston Hughes House - 20 E 127And to the north 130th is Astor Row which is a distinct area – it’s possibly part of High Five but also a distinct area of its own. By the time you get to 131 the blocks become dominated by apartment buildings – there are a few townhouses, but the core of the High Five character is lacking.

Unfortunately the area isn’t landmarked nor is it on the National Register of Historic places. The only townhouse that’s landmarked is the Langston Hughes House – 20 East 127 between 5th and Madison (see picture to the right). The Langston Hughes House is an incredible place that desperately needs an owner that will love it, care for it, and do a historically appropriate renovation (the original detail is incredible). Unfortunately it has a rather troubled past…

I went through a place close to there with a client the other day and afterwards I pulled comps and was rather shocked at how reasonable the prices are…

Exterior of 1990 MadisonIn the past year two SROs (class C5 buildings) sold in High Five… 1990 Madison was the most recent (4/8/11). We went through it twice when we were looking for a place – it took a long time to sell. It’s a big, wonderful ark of a house (see pic on right) that was in habitable but rough condition. It had high taxes, no certificate of no harassment and there was trouble with drug addicts in the house next door (which has since been resolved). It sold for $525K which works out to be $97/sq. ft.

[Notice the new owner of 1990 Madison is rebuilding the stoop with granite. Sure, it will last forever, but it’s a completely odd material to mix in with brownstone. Stopping choices like that is what landmarking is all about – but the area isn’t landmarked]

66 East 127th Street in East HarlemThe other SRO that sold was 66 East 127 (see pic of red brick building to the right). It sold for $300K back in February which works out to be $83/sq. ft. It’s on the other side of Madison, across the street from a large school, outside of what I’d consider to be the core of High Five. I can’t find any evidence it was up for sale. There was a foreclosure AND a tax lien the year before and then what seems to be a pretty quiet sale this year. Still, it’s price per square foot is inline with the price paid for 1990 Madison, though this might be some sort of inside deal and not reflect market price. It is vacant, and the new owners apparently want to flip it (according to one of the guys on the street).

8 West 127th Street, HarlemEven at the higher end – 8 West 127 (5 family) sold a month ago for $1.6M (see pic on right – the 5 story place with no cornice), which may seem like a good price but it’s got 7125 sq. ft. (19 x 75 x 5 story), so the price per square foot was just $225/sq. ft. – and that’s fully renovated – they even added a floor during the renovation.

I pulled a lot of other comps and all tell pretty much the same story. Even the luxury condo on 127 just off Lenox is only selling for $395/sq. ft. and condos typically sell for more than townhouses (on a $$/sq. ft. basis). So I view $400/sq. ft. as the ceiling in High Five, though I could see one of the fabulous ones on 5th Avenue selling for more.

2107 Fifth Avenue, HarlemThe highest townhouse comp I could find was 2107 5th Ave (4 family, renovated – see pic of light colored townhouse to the right) which went for $1.15M (roughly $295/sq. ft. – it has an extension, so actual square footage is a bit fuzzy). A client of mine went through it and said some parts of the renovation seem really well done, other parts feel cheaply done. His guess was that the owners started a high end renovation and then ran out of money mid-way through at which point they started cutting corners.

11 E 127 (3 family, fully renovated) went for slightly more – $1.175M, but it’s price per sq. ft. was lower @ $268/sq. ft.

There were no sales of one and two family homes in High Five in the past year. (Well, there was one but it appears to be one owner buying out another owner – so it’s not a proper comp.) One and two family homes sell for more than 3 and 4 family homes, so it’s completely possible something will sell in the $400/sq. ft. range – it just hasn’t happened recently.

The comps all make sense… Renovated places are selling for $150-200/sq. ft. more than shells and renovating a shell costs about $150-200+/sq. ft. depending on the condition of the shell.

The neighborhood isn’t as established as places like Mount Morris Park, but with Red Rooster opening up at 126 & Lenox, and a nice grocery store going in at 129 & Lenox, and Wild Olive on 125 just east of Lenox – things are picking up. Personally I feel as though it’s a great long-term place to invest if you buy on the right block. But prices are likely to be more volatile than they would be in more established neighborhoods – so buyers need to be careful about when they buy and sell.

I should also mention the people in High Five are incredibly friendly. A friend/client of mine was sitting on a stoop over at Madison between 129 & 130 a week or so ago when a manhole blew directly in front of him. The fire department and ConEd were called and all the neighbors came out onto the street. He and I spent nearly 2 hours with them and I have to say everyone was warm, welcoming and pretty great. I’m sure your experience will vary block to block, but there are some great places to live in High Five.

30 West 120 Sells For $2.5M – $568/sq. ft.

30 west 120 facadeLess than a month ago I was a little worried about the lack of high end sales in Mount Morris Park. Well, there’s no longer a need to worry… 30 West 120th (across the street from Marcus Garvey Park) sold on August 29th for $2.5 million. That breaks just about all the sales records since the downturn in the economy 3 years ago.

The house is “just” 18 feet wide (narrow for a house selling over $2M), but it’s roughly 60 feet deep so it has approximately 4,400 sq. ft. That means the new owner paid about $568/sq. ft. – so not only was the $2M barrier broken, but the $500/sq. ft. barrier was broken as well.

Curiously, for such a high price, there’s a rental building on one side of the house and a shell on the other side. And with all the 5th Avenue traffic going around the park it’s not a particularly quiet location. This is good news for some of the 20 and 25 footers on more the coveted blocks just off the park – they should be able to go for even higher prices.

However, the house does have a rather good provenance… It was purchased by Kareem Abdul-Jabbar in 2002 for $525K. Between 2005 (the filing date) and 2009 (the sign off date) he did a gut renovation. The estimated cost of the renovation was $375K + $7,500 for sprinklers, but that was the estimated cost – the actual cost may have been substantially higher. Given that he was renovating at the height of the market it could very well have been a $1M+ renovation.

You can see from the pictures below that the renovation was pretty conservative – no daring architectural features or anything, but still quite nice. They say townhouse buyers like original detail. There isn’t all that much original detail left in the house, but the traditional nature of the renovation must have resonated with the buyer…

parlor floorbedroomshowerAnother thing to note is that the house was single family. That means the owner was buying a degree of luxury – a 4,400 sq. ft. home. We’ll also have a quadraplex when our renovations are done, but it will only be about 3,200 sq. ft. – definitely a nice size, but not nearly as luxurious as 30 West 120. I’ve seen this in the comps before – single and two family homes often sell for substantially more than 3+ family homes.

This sale should solidify the top end of the market and hopefully it will get hesitant buyers to pay a bit more. I’ve always thought Harlem townhouses were undervalued in comparison with Brownstone Brooklyn – let’s hope that changes 🙂

After I finished this post I started thinking about the effect on shells (like the one next door). If 30 West 120 can sell for $560/sq. ft. subtract $250/sq. ft. for a nice gut renovation, then subtract say $100/sq. ft. to reimburse the new owner for the trouble of going through renovation and you still have a value of $200/sq. ft. – and that would be if it were a total shell (like ours was). The shell next door doesn’t seem like a total shell, so it could go for even more.

Of course one comp doesn’t make a trend, and rehab mortgages are getting harder and harder to come by, but as the high end prices go up so too will the prices of shells – and the changes on the low end will seem even more dramatic since renovations are a somewhat fixed cost. $200/sq. ft. is about 50% higher than the $125 to $140/sq. ft. I would have thought was an average shell value in the past (for a shell needing a total gut including structural work). 50% is a big jump.

When 1 Cent Makes A $10,000 Difference

I’m baffled… 116 West 131 sold a little over a month ago (7/20/11) and it sold for $1,000,000. I have no clue who the buyer’s real estate agent and lawyer were, but both of them should have their licenses revoked (IMHO). If they had negotiated a price one cent less it would have saved the buyer $10,000. How can two real estate professionals make a mistake like that? Seriously, I don’t get it.

The reason why one cent makes a $10,000 difference is because New York City has a 1% “mansion tax” on properties that sell for $1M or more. So if the sales price had been $999,999.99 the buyer wouldn’t have had to pay the mansion tax, but add a penny and they have to pay $10,000 in tax.

Enough about that… Let’s look at the property as a comp…

Fridge blocking stove in small kitchen

The sellers originally asked $1.495M back in May of 2009. Finally this year they dropped the price to $1.195M and it sold – but even then they had to come down nearly $200,000 – but honestly that’s pretty standard with Harlem townhouses – the asking prices are usually way over where they sell.

The building is 17′ x 48′ x 4 stories (though the lot is 16.67′ wide) so it has roughly 3,200 sq. ft. That means the cost was about $312/sq. ft. The building is a legal 3 family that was renovated in 2003 and got a new boiler in 2008. Overall, it seems to be in good condition.

Bars on windows on ground floor brownstone rentalBut the renovations are just “rental grade” –  small, Home Depot-esque kitchens, etc. My favorite detail is the picture above showing the fridge blocking the stove – not exactly a marvel of architectural ingenuity…

I’m guessing there is a 2 or 3 bedroom duplex over two 1 bedroom (or studio) floor-thru apartments – at least that’s the configuration that would make the most sense. Then again with kitchen configurations like the one in the picture above, there’s a good chance they did a less efficient layout.

Taxes on the property are higher than average, but not outrageous – $5,517 this year and projected to go to $5,755 next year.

It’s a 5 minute walk to the 2/3 at 135th Street. A/B/C/D trains are a fairly long walk – 11 minutes – much of which involves walking past the St. Nicholas Houses.

Besides the lesson of never buying a property for exactly $1M, this sale shows that there are affordable properties out there that don’t require renovation. If your funds are limited now, but you want a property that you can improve later – a property like this is perfect. You live with rental grade details in the short term and when you have the funds you renovate and make things nicer.

The Manhattan Avenue Historic District

There’s a little historic district just south of 125th Street that it seems no one knows about – the Manhattan Avenue Historic District. The buildings in it are not landmarked by the City, but the area is on the National Register of Historic Places. What that means is up to about $100,000 in tax credits for owners who renovate shells in the area or up to $50,000 to fix up ones that just need some work but aren’t shells.

Now, the sad part is that Wall Street Journal editor Julia Angwin got a public reaming in the comments on her blog when when she decided to rip out most of the original details in her house (because they were covered in lead paint and she was worried about her kids). It’s sad because I don’t think she even knew she was in the Manhattan Avenue Historic District. The $50K to $100K she could have qualified for would have more than offset the cost of keeping her original details and removing the lead paint. Instead, her house was essentially stripped of its original details.

There is a bit of a question about the actual boundaries of the historic district. According to the National Park Service’s web site the addresses included in the district are:

  • 242 to 262 West 120th Street (numbers seem wrong)
  • 341 to 362 West 121st Street
  • 341 to 362 West 122nd Street
  • 344 to 373 West 123rd Street
  • 481 to 553 Manhattan Avenue (West side)

Problem is the addresses on 120th street don’t make sense. There aren’t really a set of buildings that match those numbers. Mind you, I’d love for the addresses to be correct since I know the people who are in contract for 243 West 120, but something tells me the 120th Street addresses are wrong. At first I thought they probably meant 342 to 362, but those numbers don’t make sense either – they include a modern school building. The numbers that would make sense are 351 to 369 – but those aren’t the numbers.

manhattan avenue historic district mapIn terms of buildings in the historic district that are for sale – there’s not much… 533 Manhattan qualifies, but apparently the contract is out on it.